CH - 1 Managing The Digital Firm

CH – 1 Managing the Digital Firm
What is an Information System?

• An information system can be defined technically as a set of
interrelated components that collect, process, store, and
distribute information to support decision making and control in
an organization.
• Information system also help managers and workers analyze
problems, visualize complex subjects and create new products.
• Information system contain information about significant
people, places and things within the organization or in the
environment surroundings it.
• Input, process and output are three activities in an information
system produce the information that organizations need to
make decisions, control operations, analyze problems, and
create new products or activities.
• Input captures or collect raw data from within the organization
or from its external environment.
• Processing converts this raw input into more meaningful form.
• Output transfers the processed information to the people who
will use it or to the activities for which it will be used. Information
system also require feedback, which is output that is returned to
appropriate members of the organization to help them evaluate
or correct the input stage.
ENVIRONMENT
SUPPLIERS CUSTOMERS
ORGANIZATION
INFORMATION SYSTEM
Processing
Classify
Input Arrange Output
Calculate
Feedback
Regulatory
Stockholders Competitors
Agencies
Perspective on Information System
• From a business perspective, an information system is an
important instrument for creating value for the organization.
• There are many ways in which information system can
contribute to firm value, including the firm’s return on its
investments (accounting ROI), enhancing the company’s
strategic position, or increasing the market value of the firm’s
stock.
• Information processing activities support management decision
making, enhance the execution of business process and as a
result increase business value.
• Every business has an information value chain in which raw
information is systematically acquired, and than transformed
through various stages that add value of an information system
to a business information.
• The business perspective calls attention to the organizational
and managerial nature of information system.
• An information system also represent an organizational and
management solution, based on information technology.
• To fully understand information systems, a manager must
understand the broader organization, management and
information technology dimension of systems and their power
and provide solution to challenges and problems in the
business environment.
Organization
• Information system are integral part of organizations. Indeed,
for some companies, such as credit reporting firms, without an
information system, there would be no business.
• The key element of an organization are its people, structure,
operating procedures, politics and culture.
• The major business functions or specialized task performed by
business organizations, consist of sales and marketing,
manufacturing, finance, accounting, and human resource.
• An organization coordinates work through a structured
hierarchy and formal, standard operating procedures. The
hierarchy arranges people in a pyramid structure of rising
authority and responsibilities.
Technology
• Information technology is one of many tools manager use to
cope with change.
• Computer hardware is the physical equipment used for input,
processing, and output activities in an information system.
• Computer software is the detailed preprogrammed instructions
that control and coordinate the computer hardware components
in an information system.
• Storage technology includes both the physical media for storing
data such as magnetic or optical disk.
• All of these technologies represent resources that can be
shared throughout the organization and constitute the firm’s
information technology infrastructure.
Business Process
Supply Chain Enterprise Customer Knowledge Mgt

Mgt Mgt
Mgt
Firm
Profitability and
Strategic
Position
Data Collection Transformation
Dissemination
Storage into Business
System
Information Processing Activities
Planning Coordinating Controlling Modeling & Decision Making

Management Activities Business value
Contemporary approaches to
Information System
Technical
Approaches
Computer Operations
Science Research
Management Sociology
Science IS
Psychology Economics
Behavioral
Approaches
Technical Approach
• The technical approach to information system emphasizes
mathematically based models to study information systems, as
well as the physical technology and formal capabilities of these
system.
• Computer science is concerned with establishing theories of
computability, methods of computation, and methods of efficient
data storage and access.
• Management science emphasizes the development of models
for decision making and management practices.
• OR focuses on mathematical techniques for optimizing selected
parameters of organizations such as transportation, inventory
control, and transaction costs.
Behavioral Approach
• An important part of the information systems field is concerned
with behavioral issues that arise in the development and long-
term maintenance of information system.
• Sociologists study information systems with an eye toward how
organization and groups shape the development of the system
and also how system affect individuals, groups and
organizations.
• Psychologists study information system with an interest in how
human decision makers perceive and use formal information.
• Economists study information system with an interest in what
impact systems have on cost and control structure within the
firm within the market.
Learning To Use Information Systems: New
opportunities With Technology
The Challenge of Information System: Key Management Issues

The Emerging Digital Firm Electronic Business
Factories Customers
Remote office Suppliers

and work groups
Business
partners
The Strategic Business Challenge: Realizing the Digital
Firm :How can business use information technology to
become competitive, effective, and digitally enabled?
• Creating a digital firm and obtaining benefits is a long and

difficult journey for most organizations.
• Despite heavy information technology investments, many
organizations are not realizing significant business value from
their systems, nor are they becoming digitally enabled.
• The power of computer hardware and software has grown
much more rapidly than the ability of organizations to apply and
use this technology.
• They will have to make fundamental changes in organizational
behavior, develop new business models and eliminate the
inefficiencies of outmoded organizational structures.
The Globalization Challenge: How can firms understand
the business and system requirements of a global
economic environment?
• The rapid growth in international trade and the emergence of a
global economy call for information system that can support
both producing and selling goods in many different countries.
• In the past, each regional office of a multinational corporation
focused on solving its own unique information problems.
• To develop integrated, multinational information system,
business must develop global hardware, software, and
communications standards; create cross-cultural accounting
and reporting structures and design transnational business
process.
The Information Architecture and Infrastructure
Challenge
• Information architecture is the particular form that information
technology takes in an organization to achieve selected goals
or functions.
• Managers and employees directly interact with these systems,
it is critical for organizational success that the information
architecture meet business requirements now and in the future.
• Creating the information architecture and IT infrastructure for a
digital firm is an especially formidable task.
The Information Systems Investment Challenge: How can
organizations determine the business value of information
systems?
• A major problem raised by the development of powerful,
inexpensive computers involve not technology but management
and organization.
• It’s one thing to use information technology to design, produce,
deliver, and maintain new products.
• Most companies lack a clear-cut decision making process for
deciding which technology investment to purse and for
managing those investment.
The Responsibility and Control Challenge: How can
organizations ensure that their information system are
used in an ethically and socially responsible managers
• Although information systems have provided enormous benefits
and efficiencies, they have also created new problems and
challenges of which should manager be aware.
• Managers will also be faced with ongoing problems of security
and control.
• Information systems are so essential to business, government,
and daily life that organizations must take special steps to
ensure that they are accurate, reliable, and secure.
POSITIVE AND NEGATIVE IMPACTS OF INFORMATION
SYSTEMS
Benefits of Information System Negative Impact
Information System can perform By automating activities that
calculations or process were previously performed by
paperwork much faster than people, information systems
people may eliminate job
Information systems can help Information system may allow
companies learn more about organizations to collect personal
the purchase patterns and details about that violate their
preferences of their customer privacy
Information systems provide Information system are used in
new efficiencies through service so many aspects of everyday
such as ATM, telephone life that systems outages can
systems or computer controlled cause shutdown of business or
airplanes and air terminals. transportation services.
Information systems have Heavy users of information
made possible new medical systems may suffer repetitive
advances in surgery, radiology stress injury, technostress, and
and patient monitoring. other health problems.
The Internet distributes The Internet can be used to

information instantly to distribute illegal copies of software,
millions of people across the books, articles and other intellectua
world. property.

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CH – 1 Managing the Digital Firm

What is an Information System?

Supply Chain Enterprise Customer Knowledge Mgt

Planning Coordinating Controlling Modeling & Decision Making

The Challenge of Information System: Key Management Issues

Remote office Suppliers

• Creating a digital firm and obtaining benefits is a long and

The Internet distributes The Internet can be used to

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